Many types of “private currencies” are currently in use. A private currency refers to anything, controlled by a non-sovereign entity, which can be used to “purchase” all or part of some good or service. A vendor is said to “recognize” a private currency if the vendor accepts the private currency as payment, or partial payment, for a good or service. One example of a private currency is “frequent flyer miles” awarded by airlines that may be used in lieu of, or in combination with, legal tender to pay for airfares. As another example, many cereal companies allow children to purchase toys using “proof of purchase” coupons from cereal boxes. As yet another example, many Internet-based companies award points to users for viewing advertisements or visiting particular sites and allow the points to be spent on selected items.
Typically, a company that employs private currency does so to create an incentive for individuals to perform certain acts that benefit the company. Since those acts only benefit the company, the company that controls the private currency is frequently the only entity that recognizes the private currency. For example, one airline typically will not recognize frequent flyer miles that have been granted by a competing airline. Similarly, airfares typically cannot be purchased with “proof of purchase” coupons off cereal boxes of unrelated companies.
To increase the value of a private currency, a company that controls the private currency may enter agreements with other companies, contractually obligating those other companies to recognize, at least under certain conditions, the value of their private currency. However, such arrangements may be difficult and costly to negotiate, monitor and maintain.
The perceived value of private currency is significantly diminished due to the extremely limited number of sources that recognize the currency. For example, it is not uncommon for recipients of private currency to consider it worthless because they are not interested in anything on which it may be spent. If a private currency is considered to be of little value by those for whom it is supposed to be an incentive, it has ceased to serve its purpose.
Based on the foregoing, an approach for processing transactions that allows a participant to use private currency that is not recognized by another participant in the transaction is highly desirable.